The recent surge in gas prices is set to put more pressure on customers and companies in the following months.
This comes despite households already facing a range of financial pressures, from wage cuts or freezes during the pandemic to imminent cuts to Universal Credit and the end of the furlough scheme.
Martin Lewis, the founder of MoneySavingExpert.com, has warned that some people could see their bills surge by 40% in the coming weeks.
“The situation is catastrophic, in a way we have never seen before,” said Mr Lewis.
What is Martin Lewis’ advice for customers?
Regulator Ofgem sets an energy price cap in order to safeguard customers on default tariffs and takes into account costs to supply energy. From 1 October the price cap will increase to £1,277.
Mr Lewis highlighted the cap was based on prices in the run-up to August, he said: “Prices have exploded since then. So the price cap will change in six months.”
Mr Lewis suggested that, based on the “current run-rate”, the price cap from 1 April may be more than £1,500 a year, based on typical usage.
One option, he said is that “prices have gone up so much the price cap is now not a bad deal for the next six months and you get six months of protection.”
“Or you could bide your time and cross your fingers and wait and just go onto the price cap when your current deal finishes… because it cannot go up until 1 April.”
A second option is to “try and lock into a one or two-year fixed rate.”
“There are still a couple of tariffs out there where you can lock in for a year or two years at below what the price cap will be on 1 October. They offer protection if things do not get better.”
“Everybody needs to understand you will be paying more for your energy.”
Mr Lewis has stressed the importance of households comparing all energy deals across the market.
MoneySavingExpert.com has a Cheap Energy Club which helps people to find deals to suit their needs.
What happens if my energy supplier goes bust?
There have been many recent fears of energy suppliers going bust due to the current energy crisis.
An Ofgem spokesperson said: “For those customers who are with energy companies that can no longer trade, a new supplier will be appointed. Ofgem is working closely with Government to manage the wider implications of the global gas price increase.”
What else has been said?
Sarah Coles, a personal finance analyst at Hargreaves Lansdown, said: “For anyone with a fixed tariff this isn’t going to be an immediate problem, but when your deal comes to an end you could face a horrible jump in your costs.”
Ms Coles suggests cutting down car usage to save money and added motorists should try comparing prices on petrolprices.com.
For households trying to make savings more widely, Ms Coles said to “keep an eye on the cost of the things you buy regularly in the supermarket. That way, you can quickly check to see whether the price has changed, and if it has, you can look for cheaper alternatives.”
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